OECD Economic Survey of Chile 2021 - Presentation

2020 OECD ECONOMIC SURVEY OF CHILE Preparing for the recovery 4th February 2021, Paris – Santiago @OECDEconomy @oecd

http://www.oecd.org/economy/chile-economic-snapshot

The economy is in recession Real GDP, y-o-y % changes

Y-o-y % changes

Y-o-y % changes

Note: Data for 2020 refer to an average over Q1:Q3.

Source: OECD, Analytical database.

2020*

2019

2018

2017

-8

2016

-8

2015

-6 2014

-6 2013

-4

2012

-4

2011

-2

2010

-2

2009

0

2008

0

2007

2

2006

2

2005

4

2004

4

2003

6

2002

6

2001

8

2000

8

2

Unemployment is increasing Unemployment rate

% of labour force

% of labour force

12

12

Note: Data for 2020 refer to an average over Q1:Q3.

Source: OECD, Analytical database.

2020*

2019

2018

2017

2016

2015

2014

2013

2012

2011

0

2010

0

2009

2 2008

2 2007

4

2006

4

2005

6

2004

6

2003

8

2002

8

2001

10

2000

10

3

Inflation is back on target Y-o-y, % changes 6

Inflation tolerance range Core inflation¹

5

Headline inflation Inflation expectations²

Y-o-y, % changes 6 5

4

4

3

3

2

2

1

1

0 2014

0

2015

2016

2017

2018

2019

Note: 1. Core inflation includes all items without energy and fuels. 2. Inflation expectations at 23 months.

Source: Central Bank of Chile; National Statistical Institute (INE).

2020

4

Financial conditions are favorable Long-term sovereign rates

% 14

CHL

12

DEU

GBR

%

USA

LACยน

14 12

10

10

8

8

6

6

4

4

2

2

0

0

-2

2007

2008

2009

2010

2011

2012

2013

2014

Note: 1. LAC refers to the unweighted average of Brazil, Colombia and Mexico.

Source: OECD, Analytical database.

2015

2016

2017

2018

2019

2020

-2

5

Copper price is back to pre-pandemic levels Exports and copper price Index, 2008=100 130

USD per pound 30

Exports, volumeยน

Copper price (RHS, values in reverse order)

120

55

110

80

100

105 130

90 80

155 2008

2009

2010

2011

2012

Note: 1. Four-quarter moving averages.

Source: OECD, Analytical database; Central Bank of Chile.

2013

2014

2015

2016

2017

2018

2019 2020 6

The recovery will be gradual 2019

2020

2021

2022

Gross domestic product

1.0

-6.0

4.2

3.0

Private consumption

1.1

-7.7

7.5

3.4

Government consumption

0.0

-2.1

5.5

1.5

Gross fixed capital formation

4.2

-13.9

1.8

4.1

Exports

-2.2

-0.7

7.2

4.1

Imports

-2.3

-13.4

8.4

5.6

Consumer price index

2.6

2.9

2.6

3.0

Central government financial balance (% of GDP)

-2.8

-8.7

-4.7

-3.8

Current account balance (% of GDP)

-3.9

0.3

-0.2

-0.7

Note: GDP refers to annual percentage growth. .

Source: OECD Economic Outlook 108 database.

7

The fiscal accounts remain sustainable Central government gross debt as %GDP % 120 110 Lower long term growth and prolonged fiscal deficit³ 100 90 Lower long term growth² 80 Baseline scenario¹ 70 60 50 40 30 20 10 0 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 Source: DIPRES, OECD Economic Outlook 108, Central Bank of Chile and OECD calculations.

8

Recommendations to continue coping with COVID-19 • Increase capacity for extensive testing and tracing together with an adequate risk communication strategy • Continue to provide treatment for all patients.

• Maintain as necessary monetary measures to provide liquidity to uphold domestic demand and facilitate business.

• Continue fiscal measures to support firms, in particular SMEs, and cash transfers for the most vulnerable families, until the recovery is well underway.

9

Building a stronger middle class

10

Many households are economically vulnerable %

Economically vulnerable households, %

% 70

70

52.7

60

60

Note: The “economically vulnerable” are those who are not “income poor” but have equivalised liquid financial assets below 25% of the income poverty line. The OECD average is the simple country average.

Source: OECD, Wealth Distribution database.

LVA

GRC

SVK

NZL

CHL

POL

IRL

SVN

ESP

OECD

USA

AUS

FIN

CAN

PRT

0

EST

0

HUN

10 FRA

10 DEU

20

LUX

20

DNK

30

NLD

30

ITA

40

BEL

40

NOR

50

AUT

50

11

Out-of-pocket spending for health is high %

Out-of-pocket spending as a % of health spending

%

45

40

40

35

35

30

30

25

25

20

20

15

15

10

10

5

5

0

0

FRA LUX NLD USA IRL DEU JPN NZL SVN SWE DNK CZE NOR CAN ISL COL GBR TUR AUS FIN SVK BEL OECD POL ISR ESP ITA EST AUT CHE PRT HUN KOR LTU CHL GRC LVA MEX

45

Note: OECD refers to an unweighted average of latest available data for all its member countries.

Source: OECD, Health Expenditure and Financing database.

12

The tax and transfer system is inefficient Gini coefficient 0.5

0.45

Income inequality pre and post-tax and government transfers Gini before taxes and transfers

Gini after taxes and transfers

0.4 0.35 0.3 0.25 0.2 0.15 0.1 0

SVK ISL CHE CZE SWE EST KOR SVN NOR POL DNK HUN CAN JPN NLD DEU BEL OECD ISR LVA AUS NZL TUR AUT FIN LTU ITA PRT ESP FRA LUX GBR GRC USA IRL MEX CHL

0.05

Note: Working age population. Data for Chile refers to 2017. Data for Chile are not directly comparable to other countries due to pension’s contributions that are not taken into account, but which reduce pre-transfers and taxes income dispersion. OECD refers to the unweighted average of latest available data of 36 member countries, excluding Colombia.

Source: OECD, Income Distribution and Poverty database.

13

Educational outcomes are strongly linked to the social background PISA score 510

PISA score in mathematics for the bottom quarter of economic PISA score status

510 490

470

470

450

450

430

430

410

410

390

390

370

370

350

350

330

330

BRA COL CRI CHL MEX ARG TUR ISR GRC HUN SVK USA LUX CZE FRA LTU ESP OECD LVA PRT ITA SWE NZL AUT AUS BEL GBR ISL DEU IRL POL NOR SVN NLD FIN CHE DNK KOR CAN EST JPN

490

Note: Argentina refers to region of Ciudad Autónoma de Buenos Aires. Socio-economic status according to ESCS which refers to the PISA index of economic, social and cultural status.

Source: PISA 2015 Results (Volume I): Excellence and Equity in Education - © OECD 2016.

14

Public spending in education is low USD (PPP) 20 000

General government expenditure in in pre-primary, primary and secondary education based on full-time equivalents, in equivalent USD converted using PPPs for GDP

USD (PPP) 20 000 18 000

16 000

16 000

14 000

14 000

12 000

12 000

10 000

10 000

8 000

8 000

6 000

6 000

4 000

4 000

2 000

2 000

0

COL MEX TUR CHL LTU GRC HUN SVK POL EST CZE LVA ISR ESP PRT SVN NZL ITA AUS OECD JPN GBR FRA CAN IRL FIN KOR DEU NLD ISL USA SWE BEL DNK NOR AUT CHE LUX

18 000

Note: Data for Chile refer to 2017. Data for the OECD refer to an unweighted average from 2016.

Source: Education at a Glance 2019: OECD Indicators - © OECD 2019.

0

15

A large share of workers has precarious jobs % dependant workers 30 25

% of total employment 60

Share of temporary workers

50

Share of self-employment (RHS)

20

40

15

30

10

20

5

10

0

OECD

Source: OECD, Labour Force Statistics database.

CRI

CHL

COL

0

16

Recommendations to strengthen the middle class and foster inclusiveness • Increase the redistributive impact of the personal income tax by lowering the thresholds at which the bottom and top bracket apply.

• Establishing a single national pool of healthcare funding to cover a common package of services for the whole population • Step-up investment in high-quality early childhood, primary and secondary education.

• Enhance the provision of childcare and early childhood public structure to foster female employment.

• Make the temporary measures to increase protection for unemployed workers permanent or automatically triggered when unemployment reaches certain thresholds.

17

Boosting productivity to support the recovery

18

Productivity is polarized 1 000 x CLP

Chile has a long tail of small firms with low productivity % of firms by size

250

1 000 x CLP

200 150 1.3%

100 50

72.6%

21.0%

Micro (1-9)

Small (10-49)

5.2%

0

Source: OECD calculations based on Quinta Encuesta Longitudinal de Empresas (ELE-5), 2017.

Medium Large (50-249) (250+)

19

Many sectors are dominated by few business groups Extent of market dominance, 2019

7=best 7 6

7=best 7 Spread among many firms

Dominated by a few business groups

6

5

5

4

4

3

3

2

2

1

1

0

CHL

COL

ARG

MEX

LAC

ZAF

BRA

PRT

CRI

ESP

FRA

USA

DEU

Note: This indicator shows the extent of market dominance, 1-7 (best). In the World Economic Forum, Executive Opinion Survey, it is the answer to the following question: In your country, how do you characterize corporate activity? [1 = dominated by a few business groups; 7 = spread among many firms]. LAC refers to the unweighted average of Argentina, Brazil, Colombia, Costa Rica and Mexico.

Source: World Economic Forum, The Global Competitiveness Index 4.0 2019 dataset (version 04 October 2019).

0

20

Regulations are too complex Score 3

Complexity of regulatory procedures Score, 2018

Score 3

More complex procedures

2.5

2.5

2

2

1.5

1.5

1

1

0.5

CZE ESP KOR LVA NLD POL CHE HUN LUX ITA DEU DNK NOR SVN CAN FIN MEX SVk ISL LTU OECD GBR ISR PRT SWE TUR FRA ARG AUS NZL AUT BEL GRC JPN IRL BRA CHL

0

0.5

Source: OECD, 2018 PMR database.

0

21

The impact of new regulations is not systematically assessed Score 4.5

Assessment of impact on competition Score, 2018

Score 4.5

More assessment

4 3.5

3.5

3

3

2.5

2.5

2

2

1.5

1.5

1

1

0.5

0.5 GBR BEL AUS AUT CAN CHE CZE DEU ESP FIN FRA ISL ITA JPN KOR LTU LUX NLD NOR POL SVk SWE OECD TUR HUN IRL ISR MEX NZL DNK PRT CHL GRC ZAF SVN KAZ LVA ARG BRA

0

4

Source: OECD, 2018 PMR database.

0

22

Recommendations to close productivity gaps • Streamline permits and their process by implementing a zerolicensing procedure to encourage investment and simplify regulations for SMEs. • Open the market of notaries and allow introducing technological innovations and data sharing with the administration in a systematic way.

• Allow creditors to be able to initiate restructuring and not only liquidation.

• Disaggregate public procurement needs into regional lots and consider allowing the grouping of suppliers to improve SMEs participation.

23

Boosting digital transformation to help the recovery

24

Broadband penetration is low 200

Broadband connections per 100 inhabitants, June 2019

180 160 140

200 180

Mobile connections

Fixed connections

160 140 120

100

100

80

80

60

60

40

40

20

20

0

0

COL HUN MEX TUR PRT BEL CAN SVN DEU GRC SVK ITA AUT FRA CHL NZL CZE CHE GBR LUX ESP ISR NOR LTU IRL POL OECD KOR NLD ISL SWE LVA DNK AUS USA EST FIN JPN

120

Source: OECD, Broadband Portal, www.oecd.org/sti/broadband/oecdbroadbandportal.htm; OECD ICT Access and Usage by Households and Individuals database.

25

Low educated use less internet Internet use in the past 12 months by education level Medium

% 100

High

Zero or a low level

% 100

90

90

80

80

70

70

60

60

50

50

40

40

30

COL

GRC

LAC

MEX

CHL

OECD

TUR

ESP

30

Source: OECD, ICT Access and Usage by Households and Individuals database 26

Many Chileans lack basic skills Share of 25-54 years-old lacking basic skills, % 0

10

20

30

40

50

60

70

PER ECU MEX CHL TUR ISR SVN GRC USA POL IRL LTU GBR DEU CAN SWE KOR SVK EST DNK NZL AUT BEL NOR NLD AUS CZE FIN JPN Note: Individuals lacking basic skills score at most Level 1 (inclusive) in literacy and numeracy and at most Below Level 1 (inclusive) in problem solving (including failing ICT core and having no computer experience) Source: OECD calculations based on Survey of Adult Skills (PIAAC).

27

Training teachers should be a priority Share of teachers reporting needing further training to do their job % 80

70

70

60

60

50

50

40

40

30

30

20

20

10

10

0

0

CAN NLD BEL GBR AUS USA KOR DNK NZL TUR NOR IRL FIN SWE SVK ITA FRA ISR GRC RUS ESP SGP CZE EST SVN POL DEU AUT LTU CHL JPN

% 80

Source: OECD calculations based on Survey of Adult Skills (PIAAC); OECD, TALIS 2018 database.

28

Digital adoption in firms lags behind % of firms 40 35

Small and micro firms

Chile

OECD

30 25 20 15 10 5 0

Big data

E-sales

CMP

ICT specialists in Cloud computing the firm

ERP

Note: customer management platform (CMP), Enterprise Resource Planning (ERP) Source: For Chile, data come from the ICT survey 2019, Ministry of Economy. Data for the OECD come from OECD, ICT Access and Usage by Businesses database.

29

Automation is already impacting the labour market Employment rate changes by level of automation risk, 2011-2017 Percentage points 12 10 8 6 4 2 0 -2 -4 -6 -8 -10 -12

Low automation risk

Significant automation risk

Note: The bars show changes in employment rate in each occupational classification between 2011 and 2017. Significant risk – above 50% probability of automation; low risk – below 50% probability of automation as defined by Nedelkoska and Quintini (2018).

Source: OECD calculations based on CASEN (2011-2017), PIAAC (2012 and 2015), Marcolin et al. (2016) and Nedelkoska and Quintini (2018).

30

Those that need it the most, train less Share of workers participating in training, % of all workers % 30 25 20 15 10 5 0

Below upper -secondary

Uppersecondary

Note: Year 2017. Workers participating in training in the last 12 months.

Source: OECD calculations using CASEN (2017).

Teritiary

31

Key recommendations for boosting digital transformation • Ensure low barriers to entry to the communication sector by replacing the existing regulation for concessions.

• Increase digital literacy in schools giving digital skills more prominence in the national curriculum, and enhancing the digital skills of teachers and school-directors.

• Boost public support to SMEs, in cooperation with the private sector, trough targeted programmes to facilitate the adoption digital tools.

• Foster a collaborative digital innovation ecosystem by strengthening business collaboration and fostering openinnovation practices.

• Embark in a full revision of firm-provided training programmes to increase relevance and quality of training and better target participation to vulnerable workers.

32

For more information Disclaimers: This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.

http://www.oecd.org/economy/chile-economic-snapshot

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2020 OECD ECONOMIC SURVEY OF CHILE Preparing for the recovery 4th February 2021, 14h Paris – 10h Santiago @OECDEconomy @oecd

http://www.oecd.org/economy/chile-economic-snapshot